Mail-Order Taxes Could Add $100 Million To State Coffers (300)

KNOXVILLE, Tenn. — Tennessee might gain $100 million yearly in tax revenues through a plan being proposed by the mail-order industry, a University of Tennessee economist said Friday.

Dr. Bill Fox of UT-Knoxville’s Center for Business and Economic Research said Tennessee, like other states, does not collect sales taxes on most mail-order purchases. Few shoppers report mail-order purchases and the tax is difficult to collect, Fox said.

Mail-order industry leaders are discussing a plan to collect the tax for some states, which currently have no way to compel out-of-state firms to collect the taxes on their behalf.

“If mail-order companies agreed to collect sales-taxes for Tennessee, the state would get about 8 percent on all transactions, depending on local sales-tax options,” Fox said. “That would be a significant amount of money.” Isaac Nwaise, a researcher for the State Department of Revenue, said Tennessee already has tax collection agreements with some mail-order firms, and collected $16.5 million in tax revenues from them last year.

However, most of the state’s mail-order purchases are not taxed, he said.

“Not all the revenue potential from mail-order sales is realized in the state,” Nwaise said. “There is a lot of leakage there.”

Nationally, $215 billion in annual mail-order sales, generates about $1.2 billion in taxes, according to the Direct Marketing Association.

Based on those figures, Fox calculated that Tennessee might add about $100 million in state tax revenues if all mail-order taxes were collected.

“We are leaving a big tax loophole for people who choose to avoid to pay the tax by buying through the mail,” Fox said. “The consequence is that local shoppers have to pay a bigger share of the tax burden and local retailers lose sales.

“Tennessee suffers a considerable reduction in revenue potential as a result of these mail-order sales going untaxed.”